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[3liteDragon]

SoftBank’s $66bn sale of chip group Arm to Nvidia collapses

Transaction had faced scrutiny from regulators and was opposed by rivals

www.ft.com

Transaction had faced scrutiny from regulators and was opposed by rivals.

SoftBank’s $66bn sale of UK-based chip business Arm to Nvidia collapsed on Monday after regulators in the US, UK and EU raised serious concerns about its effects on competition in the global semiconductor industry, according to three people with direct knowledge of the transaction. The deal, the largest ever in the chip sector, would have given California-based Nvidia control of a company that makes technology at the heart of most of the world’s mobile devices. A handful of Big Tech companies that rely on Arm’s chip designs, including Qualcomm and Microsoft, had objected to the purchase.

SoftBank will receive a break-up fee of up to $1.25bn and is seeking to unload Arm through an initial public offering before the end of the year, said one of the people. The failure is set to result in management upheaval at Arm, with chief executive Simon Segars being replaced by Rene Haas, head of the company’s intellectual property unit, the person added. The collapse of the deal robs SoftBank of a big windfall it would have earned thanks to a boom in Nvidia’s stock price. The cash-and-stock transaction was worth up to $38.5bn when it was announced in September 2020. But the value soared as Nvidia’s shares took off, reaching a peak of $87bn last November.

In the UK, where politicians have viewed Arm as a strategic national asset, attention is set to shift to whether the company will be listed on the country’s domestic market. A British competition review into the deal was extended late last year to include national security considerations. However, people close to SoftBank said the group prefers the idea of listing Arm in New York and will seek to resist nationalistic pressure. US markets accord higher valuations to tech stocks, even after a recent sharp reversal, and UK tech executives recently pressed for changes to listing arrangements to make London more attractive.

Nvidia decided to abandon its pursuit of Arm at board meeting earlier on Monday, said a person familiar with the discussion. Its pursuit of Arm marked an opportunistic attempt to score an end-run around chip rivals such as Intel and AMD, and was prompted by an approach from SoftBank after the Japanese company decided to shed the business. Jensen Huang, Nvidia’s chief executive, hoped to use Arm’s processor designs to cement his company’s growing role in data centres, where its graphical processors have become important tools for machine learning.

However, some of the Big Tech companies that rely on Arm’s designs for their own chips argued that Nvidia would get an unfair advantage by having first rights to Arm’s technology, hurting competition. Nvidia offered to competition regulators that it would maintain sales to Arm’s other customers after the deal was completed. However, the UK’s Competition and Markets Authority said it did not believe any such arrangements would be effective, and the US Federal Trade Commission launched an in-depth investigation late last year.

 

[Magic Carpet]

Microsofts turn?

 

[Esca]

No surprise there

 

[Zok310]

Microsofts turn?

USA vs EU regulators, nah. Unless the USA want to use MS an an example.

 

[kingfey]

However, some of the Big Tech companies that rely on Arm’s designs for their own chips argued that Nvidia would get an unfair advantage by having first rights to Arm’s technology, hurting competition. Nvidia offered to competition regulators that it would maintain sales to Arm’s other customers after the deal was completed. However, the UK’s Competition and Markets Authority said it did not believe any such arrangements would be effective, and the US Federal Trade Commission launched an in-depth investigation late last year.

This is the reason why it broke. Nvidia would have some strong control on these devices.
Techs today are important for everyone. Letting 1 single company control that, sets a big problem, which can harm small business, if Nvidia doesnt like them.

 

[kingfey]

Microsofts turn?

MS cant erase new developers. Nvidia can erase any new competitors, if they own arm.

 

[Magic Carpet]

Arm public offering in the future. I wonder how hot that IPO will be.

 

[Ozriel]

Microsofts turn?

You read the OP and somehow decided that an activision acquisition would have national security implications and. give Microsoft a lifetime unfair technology advantage ?

USA vs EU regulators, nah. Unless the USA want to use MS an an example.

The NVIDiA deal was also rejected in the US. It’s written plainly in the OP!

 

[sainraja]

You read the OP and somehow decided that an activision acquisition would have national security implications and. give Microsoft a lifetime unfair technology advantage ?

I think he was joking.

 

[ReBurn]

To the surprise of no one

 

[iHaunter]

FTC shoved fist up their ass eh?

 

[Plantoid]

Fuck me, my Nvidia stock is already down almost 30% and now this...

 

[TransTrender]

Glad this is over but I wonder if part 2 of this act is kicking off. Essentially sabotage your own business, maybe only on paper through slick accounting, and then they cry poverty and complain they can only be successful if they're bought out by someone for some reason. Hard for the puppet masters to say no at that point, and who doesn't like a juicy payday am I rite?

 

[Chittagong]

Oof, Softbank will be in for a rough time. The windfall from this was meant to divert attention away from SVF, now they are left with the uncertain prospect of IPO in a souring market.

 

[Shmunter]

Looks like tech getting away with monopolistic behavior is at an end..............again.

 

[Ozriel]

Glad this is over but I wonder if part 2 of this act is kicking off. Essentially sabotage your own business, maybe only on paper through slick accounting, and then they cry poverty and complain they can only be successful if they're bought out by someone for some reason. Hard for the puppet masters to say no at that point, and who doesn't like a juicy payday am I rite?

I don’t see how this analogy applies to ARM, SoftBank or NVIDiA.

 

[Chris_Rivera]

Leather jacket man up to no good. He just want to tighten balls in vice.

 

[TransTrender]

I don’t see how this analogy applies to ARM, SoftBank or NVIDiA.

A plan hatched by Soft Bank to sell ARM whole instead of a messy and potentially less profitable IPO where Nvidia swoops in to "save the day" by "rescuing" ARM with an all cash buyout.

Just being cynical here.

 

[yurinka]

We need to have more competition in this area instead of less. I think this acquisition should never happen.

 

[Bernd Lauert]

Microsofts turn?

Hopium. It's not even a remotely comparable situation.

 

[Unknown Soldier]

Arm public offering in the future. I wonder how hot that IPO will be.

Highly questionable who will want it. No one seems to know that ARM isn't profitable and in fact would face severe financial difficulties as an independent company. Yes, the company whose architecture powers 200 billion devices worldwide can't turn a profit, and there's a number of reasons why this is.

The Nvidia acquisition would have been best for ARM in terms of being an ongoing concern going forward. Now their future is seriously in doubt.

 

[Thirty7ven]

Nvidia is an awful company for even trying this bs.

 

[Oddvintagechap]

Microsofts turn?

They will need to make concessions, but they will be allowed.

Microsoft is very infamous for monopolization, usually sneakily.

 

[3liteDragon]

We need to have more competition in this area instead of less. I think this acquisition should never happen.

Well, yea it got blocked...

 

[Azurro]

Good, fuck Nvidia, the hubris they had to think that they could get away with buying ARM is astounding.

 

[Cyberpunkd]

Masayoshi Son am cry

 

[Cyberpunkd]

I don’t see how this analogy applies to ARM, SoftBank or NVIDiA.

You don't see how the parties involved can potentially profit from NVIDIA buying ARM? Let me introduce you to a wonderful world of stock options...

 

[ZehDon]

Microsofts turn?

Talk about a bad take.

 

[Elios83]

Poor Jen Hsun Huang, his monopolistic dreams were crushed.

 

[Ozriel]

You don't see how the parties involved can potentially profit from NVIDIA buying ARM? Let me introduce you to a wonderful world of stock options...

Is that what the analogy was about?

Was ARM sabotaged? is SoftBank up for sale?

 

[Cyberpunkd]

Was ARM sabotaged? is SoftBank up for sale?

There are for sure numerous individuals within Softbank and ARM that would have profited from this transaction, for example people that hold shares of AMD that can cash out in two scenarios:

1. Company goes public
2. Company gets bought

Add to this the fact Softbank can use some nice press after the WeWork disaster.

 

[TheKratos]

Fuck me, my Nvidia stock is already down almost 30% and now this...

This is good for the stock and it was well known in advance ARM wouldn't go through.

 

[Bo_Hazem]

Now nVidia will say:"But look at Microsoft! $68.7B monopoly attempt!".

While Jimbo acquiring as much as he can during this mess.

 

[TheThreadsThatBindUs]

MS cant erase new developers. Nvidia can erase any new competitors, if they own arm.

The threshold isn't a monopoly. It's simply anything that meaningfully stifles competition in the market. Regulators' jobs are to stamp out anti-competitive behaviour to prevent monopolies from forming, not to only look out for monopolies (because the latter approach would result in monopolies forming long before regulators can act).

 

[kingfey]

The threshold isn't a monopoly. It's simply anything that meaningfully stifles competition in the market. Regulators' jobs are to stamp out anti-competitive behaviour to prevent monopolies from forming, not to only look out for monopolies (because the latter approach would result in monopolies forming long before regulators can act).

You cant stiff out other competition, if you don't have a monopoly.

Anti-competitive starts, when you are close to monopoly. You have alot alot of power, and can affect your competition.

If you have 10% of the market, you cant really do anything to other competitors.

 

[TheThreadsThatBindUs]

You cant stiff out other competition, if you don't have a monopoly.

Anti-competitive starts, when you are close to monopoly. You have alot alot of power, and can affect your competition.

If you have 10% of the market, you cant really do anything to other competitors.

Nope.

Anti-competitive behaviour can encompass anything from bribes to get ahead, to incentivising suppliers to shut out your competitors.

You don't have to have a monopoly or even be close to it to be able to engage in such anti-competitive practices. I have no idea where you got that idea from but it's patently false.

 

[ChuckeRearmed]

I think no other way other than going IPO. ARM at this point is akin Internet regarding widespread usage. Probably it should have become an open standard at one point.

This is the reason why it broke. Nvidia would have some strong control on these devices.

Yes, also Nvidia has a notoriety in their proprietary stuff.

Highly questionable who will want it. No one seems to know that ARM isn't profitable and in fact would face severe financial difficulties as an independent company. Yes, the company whose architecture powers 200 billion devices worldwide can't turn a profit, and there's a number of reasons why this is.

I wonder if they can be created something like ARM Consortium where multiple companies are contributing to this standard.

They will need to make concessions, but they will be allowed.

Nah, they won't need to make any concessions

 

[NickFire]

Nope.

Anti-competitive behaviour can encompass anything from bribes to get ahead, to incentivising suppliers to shut out your competitors.

You don't have to have a monopoly or even be close to it to be able to engage in such anti-competitive practices. I have no idea where you got that idea from but it's patently false.

I'm not about to take sides on whether someone else will get held up or blocked too. But I agree with what you're saying. These massive deals can get reviewed / pushed back against well before one party to a transaction has cornered the market. Countries don't wait until the worst case scenario occurred before they start poking around.

Deals can be held up for even less, such as for political capital. I doubt many get blocked for purely political reasons in the end though. At least I hope not.

 

[ChuckeRearmed]

Deals can be held up for even less, such as for political capital. I doubt many get blocked for purely political reasons in the end though. At least I hope not.

I don't think any deal was blocked on a purely political basis.

 

[Bernkastel]

Now nVidia will say:"But look at Microsoft! $68.7B monopoly attempt!".

The delusions of this guy, he actually imagined a scenario where somehow this will lead to ActiBliz deal collapsing. I see you were just projecting yourself when accusing others of being spooked over Bungie deal.

 

[Sanepar]

There is still hope to block Activision deal.

 

[FStubbs]

There is still hope to block Activision deal.

Not the same thing. Not in the same zip code.

Huawei or some other Chinese firm will try next and succeed.

 

[kingfey]

Anti-competitive behaviour can encompass anything from bribes to get ahead, to incentivising suppliers to shut out your competitors.

That works, when you have strong market. Not 10% of market share.

You don't have to have a monopoly or even be close to it to be able to engage in such anti-competitive practices. I have no idea where you got that idea from but it's patently false

You have to be in strong position, to have power over others. No one will take favors from you, if you aren't in strong position.

 

[Bo_Hazem]

The delusions of this guy, he actually imagined a scenario where somehow this will lead to ActiBliz deal collapsing. I see you were just projecting yourself when accusing others of being spooked over Bungie deal.

With how you keep up with all my post history you would be a great secretary.

 

[SenjutsuSage]

They will need to make concessions, but they will be allowed.

Microsoft is very infamous for monopolization, usually sneakily.

Microsoft will make zero "real" concessions. Mark it down for around Jan-march 2023.

 

[TheThreadsThatBindUs]

I'm not about to take sides on whether someone else will get held up or blocked too. But I agree with what you're saying. These massive deals can get reviewed / pushed back against well before one party to a transaction has cornered the market. Countries don't wait until the worst case scenario occurred before they start poking around.

Deals can be held up for even less, such as for political capital. I doubt many get blocked for purely political reasons in the end though. At least I hope not.

Yes agreed.

I don't even think the MS-Activision deal will ultimately be blocked, but I fully expect regulators to go after it hard to make a name for themselves. There's a political element clearly driving the attention of regulators. It's clear there's a sense that big powerful tech companies have had a free ride for too long.

That works, when you have strong market. Not 10% of market share.

You have to be in strong position, to have power over others. No one will take favors from you, if you aren't in strong position.

Strong market position =/= monopoly.

Nor does it equal a near-monopoly.

A market player with a 30% share of the market can engage in anti-competitive behaviour if they're willing to spend enough to do it and take on the risks associated.

 

[kingfey]

Strong market position =/= monopoly.

Nor does it equal a near-monopoly.

A market player with a 30% share of the market can engage in anti-competitive behaviour if they're willing to spend enough to do it and take on the risks associated.

Strong market leads in to monopoly. By having strong position in the market, you basically have strong deck against other competitors. Which leads in to anti-competitive behavior, and that itself would land you in to monopoly, since you are exerting your position of the market, to benefit yourself.

"Anti-competitive behaviour is used by business and governments to lessen competition within the markets so that monopolies and dominant firms can generate supernormal profits and deter competitors from the market"

 

[Silver Wattle]

The deal was never worthwhile for Nvidia, Nvidia should just invest billions in RISC-V.

 

[too much eslim]

Nope.

Anti-competitive behaviour can encompass anything from bribes to get ahead, to incentivising suppliers to shut out your competitors.

You don't have to have a monopoly or even be close to it to be able to engage in such anti-competitive practices. I have no idea where you got that idea from but it's patently false.

If that's the case then Sony is a monopoly the way they tried to stop xbox from having games.

 

[Chiggs]

Microsofts turn?

Unlikely. Two cases share more differences than similarities.